Succession planning for your business
Have you considered succession planning for your business? Many of us have a Will in place stipulating what we would like to happen to our personal assets in the event of our death, however, we have found that very few people have a similar formalised structure in place for their business.
For the majority of small business owners, their company represents an enormous investment of time and hard work, as well as a large proportion of their net worth and yet, more often than not, no formal arrangements are in place.
The appropriate arrangements to put in place vary from company to company, however, if you are a small business owner, consider the following questions:
• Would the business survive if you were to die or be unable to work for a long period of time?
• Would your business partners be comfortable with your beneficiaries inheriting your share in the business?
• Would your beneficiaries want to be involved in the business at all, or would they prefer to instead have ‘fair value’ for their share?
One such solution to some of the above issues is shareholder / partnership protection. This typically involves each partner / director taking out, and writing into trust for the other owners, a life policy with a sum assured equal to the value of their shareholding in the business. This is setup alongside a formalised agreement giving the remaining partners / directors the option to buy out the deceased owners’ share of the business from their estate (or the beneficiaries the option to sell), with the life cover providing the capital to do so.
This means the beneficiaries of the estate, who may not have the knowledge or inclination to continue an involvement in the business, can achieve a ‘fair value’ for the share of the business they have inherited, whilst at the same time it means the remaining partners / directors retain full control of the business.
If the above, or any other potential area of business financial planning, is of interest, please contact us and we would be happy to conduct an initial no obligation meeting to look at the ways in which we might be able to assist with your business planning arrangements.